Sat, 21 Nov 2009

Michigan is a beautiful state with many things going for it. It touches all but one of the Great Lakes. It’s the only state in the union where residents describe where they’re from by pointing at their hand: right hand for the lower penninsual and left hand for the upper penninsula. Michigan played a key role in the industrial revolution when Henry Ford introduced the production line. Detroit was the Arsenal of Democracy during World War II but is now in serious decline. And so is Michigan.

As I see it, Michigan’s problems are three-fold: declining manufacturing sector and lagging replacement jobs, a structural deficit, and a dysfunctional political process. Michigan won’t truly mend and become great again until all three of those are addressed. All the legs have to be present, stable, and durable for the stool to be useful.

Don’t misunderstand. I’m in favor of programs that facilitate displaced workers finding new employment. Until new jobs show up in Michigan, however, evisceration of automotive jobs is not a step forward. Underfunding of Michigan’s No Worker Left Behind program isn’t helping, either.

Just as jobs have been declining over the last decade, state government operated with a structural deficit each of those years and continues to do so. A structural deficit will not be fixed by better economic conditions. Michigan’s structural deficit predates the recession.

The economic downturn exacerbates the structural deficit by adding a cyclical deficit. That problem will go away when the economy improves. Conventional wisdom claims Michigan’s tax system needs restructuring because it’s out of sync with the new economy. This is an easy argument to make with charts showing decreasing revenues from various taxes such as income and sales and use taxes. Well, duh! With increasing job losses, there’s less income and, therefore, less buying. Looking below the surface, however, a Pew Center on the States report finds Michigan tax revenues not doing so badly. From a Mackinac Center for Public Policy summary:

In the current recession, despite having the worst economy in the nation, Michigan’s tax revenues have fallen less than those in 31 other states, when measured in relation to state employment and personal income declines.

Fixing the structural deficit comes down to four options: raise current taxes, expand the tax base, curtail government spending, or a combination thereof. Unfortunately Michigan politicians don’t understand the problem. They grandstand, like Bishop blaming the Democratic House and Gov. Granholm. They punish the citizens, like Gov. Granholm laying off State Troopers to save only half of what it cost to train them just a year ago. And they waste time, like the House taking two months last summer. I used to be in favor of term limits since voters don’t seem to be able to dump inept politicians on their own. I’m afraid the side effect is politicians with a myopic view of the issues and no incentive to find real solutions. Bandaid fixes are good enough until the next guy takes the chair.

What to do about the structural deficit, then? We need to look at a menu of reforms, starting with spending. This isn’t a simple matter of just slashing budgets or taking a one-size fits all view. It requires prioritizing the tasks of government and drilling down into the detail of what we’re spending money on. A lot of things can be done more efficiently and there are a lot of costs that can be reduced. Any look at taxes can come after that.

Dysfunctional Political Process

Michigan Speaker of the House Andy Dillon (D-Redford) and others say Michigan’s political process is dysfunctional. The state government shutdown in 2007 and two subsequent near-shutdowns over budget deals is clear evidence of that. Again, I’m beginning to think the root cause is term limits. There’s no long term planning taking place in Lansing.

It doesn’t help that Speaker Dillon, State Senate Leader Mike Bishop (R-Rochester), and Gov. Jennifer Granholm all hate each others’ guts. Granholm has failed to display clear leadership throughout the fiscal year 2010 budget process. She laid out her budget proposal in February and then pretty much disengaged from the process except to lay off 100 state troopers in June. She finally came out of hibernation after Labor Day and has been rather vindictive in dealing with the budget.

As for Mike Bishop, the State Senate Majority Leader? He’s been pretty much hands off since GOP-dominated Senate passed its versions of balanced budget bills in June. Since then he just waited for the Democratic House to come crawling to him. Bishop’s stance has been no new revenue all along, only budging slightly in a few cases. Even with Granholm slashing money out of the schools budget, Bishop says the Senate’s not putting money back in there. Last time I checked, compromise involved give-and-take on both sides. Smug Bishop is standing there with his arms folded across his chest not doing much giving.

Michigan’s top politicians are like The 3 Stooges, only they’re not funny. And Michigan’s citizens are not laughing. Those clowns can’t sit down together and get anything done. Apparently they don’t realize they can’t just be running around, not paying attention to anyone or anything else, if they want to arrive at the same destination, which is presumably a better Michigan. All three of them needs to just grow up.